Outlook Today

Bob Utterback has more than 26 years of experience and offers producers a disciplined approach to marketing.

Wet harvest and weak dollar adds volatility to the grain markets

Oct 23, 2009

One of the wettest time periods for the corn and bean production has helped lead to one of the slowest grain harvests on record and subsequently a very abnormal October rally.

Today December corn was able to break through overhead resistance of $4.09 rather easily in the early trading session but was unable to hold and profit taking came into the market on late trading. The tone next week will take its lead first from the weather outlooks and then from the direction of the dollar, oil and gold. Right now, the weather forecasts look to have chances of rain with limited harvest activity for beans but some for corn.

Looking forward I have to say it’s the bulls’ game now. Up to now the bear was holding on hoping for harvest pressure. Effectively, only the most disciplined scale-up seller is still in the hedging side and most short term traders have now turned positive. I would suggest the worst correction one would expect now is down to the $3.82 versus an immediate upside objective of $4.38.

Long term: While the bears have been wounded, they're not dead. They realize the ability to sell 2010 production in the July 2011 at $4.57 represents a very good return. With fertilizer and fuel cost down sharply from the 2008 highs the profit margins that this represents is as good for many when corn was at $6. If you can lock up your fertilizer, gas and cash rents and post a $150 plus return I have to say it’s time to really get your banker on your side and start a solid long term selling program.

Pleas note once you decide to sell the market because of profit only two variables should be considered: 1 Converting futures to a cash sale when the basis is good. 2. Try to keep the short hedge in the month that is going up the slowest in bull markets and in the months that are weakest when the markets contracting. Right now I would suggest the further you are into the future the better off you would be.

As for soybeans producers, they are focusing hardest on getting the beans out. I’ve heard producers are even willing to harvest and put in the dryer to get down the moisture rather than wait. I continue to suggest soybeans are not potentially as bullish because of weather as corn is right now. Granted the trend is up but it’s rather weak. Right now I continue to be a seller off the combine rather than put in the bin. If you are putting in the bin I would not want November beans closing below $10 or any sudden rally in the dollar above $77 or crude oil breaking below $75 before having beans moved. If you are bullish but want a defensive selling strategy, consider putting your offers at your local elevator around the 13-day moving average. Right now this is at $9.80 a little lower than my taste but it does keep give you a line in the sand level where you will not allow prices to move below before moving inventory. Otherwise, simply keep moving the stops up as the market rallies.

Long term, my concern continues to be acres are going to grow domestically and globally. So the demand that everybody is expecting is going to be forced to show up! So my suggestion is once November 2010 beans get above $10 you should not allow them to go below before having a core of your inventory protected.

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2009.